The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

Overseeing strategy in the digital age

Before the digital revolution, technology played a mostly supporting role to corporate strategy. Information technology departments controlled the identification, investment and implementation of operating systems and technology tools that served corporate workforces. Technology was viewed more as an enabler versus a driver of the business with boards and management teams in strategy discussions.

Enter digital — including the convergence of business, customers and technology — and suddenly technology has emerged as a primary driver of business value, now defining strategy development. Since the 1990s, digital has facilitated radical transformations in business and given rise to entirely new industries and business models. Digital has also removed intermediaries in retail shopping and distribution capabilities. Despite its potential for generating value, digital has also created steep challenges for legacy businesses and startups alike.

Digital disruption has led to a confusing tapestry of technologies and an explosion of fragmented systems within organizations. In the rush to deliver new experiences to customers, businesses also face near-constant threats from cyber attacks, forcing the need for security measures to protect data and systems. To unlock the potential with digital technology, boards must make sure that the technology agenda is integrated into strategy development and oversight. Given the rapid pace of change and disruption, where and how should they begin?

Understanding the digital landscape

To best position themselves for effective oversight of digital strategies, boards should understand the stages of digital transformation and some of the key factors that may impact related go-to-market strategies and operations.

To become “digital,” companies must find ways to open up their infrastructure to consumers who desire to interact and conduct business through their computers and mobile devices. This context is a primary driver of digital transformation and subsequent technology decisions for both legacy businesses and digital natives.

Most organizations are at different stages of transformation. The first phase involves digitizing existing platforms – the phase where most companies find themselves today. This stage is followed by differentiating through new capabilities before reaching a third and final phase of implementing innovative, disruptive business models.

Where companies are and where they aspire to be along this continuum have profound implications on the technology decisions facing companies. Boards should understand their companies’ digital progression and be aware of key factors that may impact strategy, including the accelerated pace of technological change and innovation, emerging technologies (e.g., artificial intelligence and blockchain), the inundation of digital data requiring new systems of storage and analysis, and the need for designing distinct digital experiences for multiple channels (e.g., mobile, social).

In overseeing digital strategies, boards should also consider how technology is aligned with the company’s purpose and supporting business and customer goals, such as crafting the ideal digital experience for customers and employees, embedding security at each stage, and effectively navigating the path of modernizing legacy technology and consolidating systems and applications.

Effecting board oversight of the technology agenda

As leading companies move to align technology to purpose and customer experience, Boards must better understand the rapidly evolving digital landscape to serve as a strategic partner to management. This may call for a rethinking of board composition, structure and meeting cadence and design.

  • Digital directors. Boards should consider how best to make sure that the board has the digital expertise suited to the company’s unique circumstances. For some boards, that may mean appointing one or two digital directors who can lead the board in navigating technology oversight (though such an appointment may have a limited tenure due to the pace of technological change — and may risk creating siloed experts that hamper group decision-making). For other boards, that may mean regularly consulting with management and outside experts to build board understanding and digital competency. Based on a review of the qualifications of independent directors elected to Fortune 100 boards for the first time in 2016, technology ranked seventh on the list of skills most frequently noted.
  • Technology committees. While strategy remains a full-board responsibility, some boards are forming formal or ad hoc committees that meet between board meetings to sustain focus and momentum on long-term, technology-focused strategic initiatives and business transformations. And some companies are forming technology committees to structure their governance to the company’s evolving risks and strategic opportunities specific to technology. Of S&P 500 companies, 6% had a designated technology committee in 2016, up from 4% in 2013.
  • Increased meeting frequency and focus on strategy. Beyond the creation of committees, leading boards are also sustaining a focus on technology and strategy by discussing strategy at each board meeting and increasing the frequency of board meetings and communications as appropriate. Gone are the standard once- a-year, off-site, deep-dive strategy sessions for the board. Today’s leading boards know that being an effective strategic partner for management, and being positioned to successfully oversee nimble digital strategies, means going well beyond compliance.

Conclusion

As new and evolving technologies disrupt business models and entire industries, which are converging at an unprecedented rate, it is incumbent upon boards to make sure that technology is integrated into strategy development, and that board composition and structure are aligned to evolving oversight needs.

Understanding the technology landscape and emerging trends, as well as the benefits of a customer-first and purpose-led digital strategy, can position the board to ask better questions of management. Importantly, today’s world of digital disruption may also prove disruptive to the board itself, requiring a new operating model that is agile, customer-obsessed and committed to change.

Questions for the board to consider

  • How is the board staying current on new and evolving technologies and their potential impact on the company’s industry, strategy and business model?
  • At what stage is the company on its digital transformation journey?
  • Does the board have the bandwidth to engage the digital technology agenda directly or is a breakout committee required?
  • Do board and committee meeting schedules provide for an appropriate focus on strategy and technology?

Contacts

Stephen W. Klemash
+1 412 644 7461

Kris Pederson
+1 303 888 7206